Skanska UK has warned that the impact on its business from the covid-19 pandemic is currently “unclear” but that it is bracing for a fall in both its operating profit and cash resources in 2020.
The news came as the firm unveiled its results for the year to 31 December 2019. Revenue for the year fell to £1.8bn, down from £1.9bn in the previous year. Profit before tax dipped to £14.3m, down from £44.1m in 2018.
The fall in profit related mainly to the write-off of goodwill association with the contractor’s infrastructure services and utilities operating units. Skanska said its operating margin for 2019 was 0.7%.
Meanwhile, its cash reserves increased over the year. Its consolidated year-end cash and equivalents at the year-end in 2019 was £473.7m, an increase of £99.9m on 2018, thanks to the sale of the 51 Moorgate commercial development project. The group, which expects to pick up £1bn worth of HS2 work, has no debt.
Having already announced that it would withdraw from the highways maintenance, rail maintenance and street lighting maintenance sectors, Skanska said it had also decided to exit key utilities contracts, running them down with an expected closure in 2021.
Chief financial officer Kelly Gangotra said: “While we have managed to maintain a healthy and more focused order book, we apply a highly cautious approach to 2020 predominantly due to the covid-19 pandemic, due to the uncertainty in the marketplace. Once this global epidemic subsides and the impact is understood, the group is also wary of the direct and indirect impact arising from the UK’s exit from the EU at the end of 2020. The industry remains in a state of uncertainty as the future impact remains unclear especially on issues such as access to labour, what non-tariff barriers will apply or the likelihood of tariffs being imposed.”